10 ms·

Suck It, Wall Street

268 points by undefined1 6y ago

auslegung 6y ago
This has been the best piece on the WSB event I’ve read so far. It gives historical comparison to the 2008 crash, and enough basic explanation so I can better understand the finer points.
- deleted 6y ago
  [deleted]
- heckerhut 6y ago
  The vice piece was better imho https://www.google.com/amp/s/www.businessinsider.com/highly-shorted-stocks-soaring-reddit-wallstreetbet-traders-wall-street-2021-1%3famp https://www.google.com/amp/s/www.businessinsider.com/highly-...
  - reustle 6y ago
    Non-AMP URL: https://markets.businessinsider.com/news/stocks/highly-shorted-stocks-soaring-reddit-wallstreetbet-traders-wall-street-2021-1-1030011346 https://markets.businessinsider.com/news/stocks/highly-short...
    - jessaustin 6y ago
      I've been so wrong, so discouraged, so cynical. Truly, there are heroes among us.
santoshalper 6y ago
There is absolutely nothing wrong with short sellers. People who attack short sellers only do it when they are protecting their rich friends who are CEOs. There is absolutely nothing wrong with redditors fucking with short sellers. People who are clutching their pearls about this are only trying to protect rich friends who are hedge fund managers. There is nothing wrong, illegal, or immoral about trying to "manipulate" the stock market unless you are committing fraud or have insider information. CEOs of companies, activist investors, and analysts do this for a living every day. They are not more qualified than us to have and share opinions and history tells us they are perhaps much less. There is absolutely zero reason for anyone - SEC, The Government, robinhood, the exchanges, Facebook - to intervene and anyone who is considering intervention right now is only doing it to protect their rich hedge-fund friends.
- tcbawo 6y ago
  Not a lawyer, but pump and dump schemes are illegal under existing law: https://www.investopedia.com/terms/p/pumpanddump.asp https://www.investopedia.com/terms/p/pumpanddump.asp Even if the motivation of the 'pump' aspect is perceived to be righting a wrong, consumers left holding the bag will be harmed. The companies involved are intervening to avoid additional liability (they may already be sanctioned for not having safeguards in place). There will most certainly be civil and criminal investigation into the users involved. Although I doubt the government is equipped to investigate the sheer volume of material.
  - AnthonyMouse 6y ago
    The difference here is that the people left holding the bag are nominally the short sellers, not anyone being conned into buying the stock. There is a risk that you could hold it too long, i.e. past when they've closed their positions, but that risk is known up front and you're not deceiving anybody. An interesting resolution to this would be if GameStop would allow the short sellers to close their positions by selling them newly minted shares. The result would be that the company would get all the money instead of the shareholders. But the shareholders own the company. So the share price would only crash by half (from the dilution) instead of 99% or whatever it is now. Which would also have the effect of saving the company.
    - BobbyJo 6y ago
      Short sellers aren't holding the bag, they are holding money and owe someone the bag. People who are long are the ones that will suffer when the inevitable crash comes. Also, I don't believe it's legal for a public companies to issue shares to specific parties at sub-market prices. It certainly wouldn't be legal for the to do it if shareholders didn't approve of it.
      - perl4ever 6y ago
        GameStop filed in December with the SEC to sell up to $100M in stock at the market, from time to time. Now it seems like a laughably small amount. I think it is common for public companies to sell stock below market though. If they set a price ahead of time, unlike GameStop in this instance, then the market price will change, right?
cma 6y ago
He only ever talks about the hedge fund collapsing, but never mentions who is next in line (brokerages, clearing houses, and ultimately brokerage customers). SIPR only insures up to $2.5billion against systemic risk, with an additional $2.5billion from the government. Everyone's brokerage account holdings could be transferred to GameStop holders, or government steps in and tweaks things to allow it all to unwind.
- perl4ever 6y ago
  >Everyone's brokerage account holdings could be transferred to GameStop holders What are you talking about? How does this happen?
  - cma 6y ago
    https://www.sipc.org/cases-and-claims/how-a-liquidation-works https://www.sipc.org/cases-and-claims/how-a-liquidation-work... Except with SIPC itself being defunct. You hopefully still have priority over GameStop holders that didn't cash out yet and have busted trades from a bankrupt clearinghouse and priority over other creditors. No SIPC to cover your legal costs pursuing your claims. I think margin accounts may be behind fully settled cash accounts in line.
    - inter_netuser 6y ago
      if a single stock can damage the entire system - perhaps it is the system that's not well designed?
      - QuesnayJr 6y ago
        The system isn't well-designed. The actual mechanics of the stock trading process are jury-rigged to allow for the high volumes of trade we see. People have speculated that this is an area of application for distributed ledger technology, but the Australian Stock Exchange has been trying to roll out such a system and it has been slow: https://www.fintechfutures.com/2020/07/australian-securities-exchange-delays-blockchain-go-live-to-2022/ https://www.fintechfutures.com/2020/07/australian-securities...
tptacek 6y ago
How do people take this guy seriously? All that froth allowed finance companies to suck out hundreds of billions in fees, encouraged lunatic risk-taking in every direction and rampages of private equity takeovers, and kept a vast stable of functionally dead companies alive on cheap credit. Those so-called “zombie companies” make up roughly 30% of all corporations in America now, and they racked up over a trillion dollars in new debt since the pandemic alone. His own link(!) points out that these "zombie companies" include the WSB long target AMC (fair enough), Tesla, and, wait for it, Moderna. Did he even read it? Or does he assume we won't?
- chipotle_coyote 6y ago
  I remember enjoying Taibbi's "gonzo journalism" style fifteen-ish years ago in Rolling Stone. But whenever I've followed a link to his Substack newsletter, it seems to be, ah, a lot heavier on the gonzo part than the journalism part -- down the rabbit hole of cranky contrarianism with nary an editor around to reel him back occasionally.
  - ashtonkem 6y ago
    There seems to be a recent trend of formerly serious people going full crank. There isn't enough consistency in demographics for me to posit a useful theory, but it seems to be happening to a lot of people.
    - op03 6y ago
      Too much spent time getting needled on Twitter. People think their brains are immune to trolling.
      - throwawaysea 6y ago
        This is it. I think the viral short form fast news hot takes format of Twitter (and its related cousins like Reddit) brings out the worst in people. It’s built to amplify the loud fringes who will engage in the worst ways at the drop of a hat. It ends up depressing all the users and turning them into reactionaries who can only tolerate an echo chamber of confirmation bias.
roenxi 6y ago
As always; the story is ongoing and the people taking firm positions about what has happened would be well advised to wait until after it has, in fact, happened. Few if any of the people commenting on this know who got rich out of this yet or what was driving it. Theories - not evidence - are in evidence. Finance is a slow game. Mistakes are built into over month, years or even decades. The only thing that happens quickly is crossing the point of no return. Pretending that a point of no return is when the mistake happened and requires an immediate view or response is bad framing.
- lasagnaphil 6y ago
  However, I think the "mistakes" of the financial institutions are things that have been already built over the decades throughout the neoliberal era (over-reliance on credit and the reserve currency status of the US dollar), and things are *really* past the point of no return now. You can't deny this populist event has no political consequences whatsoever and can be simply solved in the context of "finance" alone. Quite a lot of Americans already have near zero trust towards financial institutions (well, more after they were bailed out in 2008 and nothing has changed out of their risky financial practices), and it's going to be harder for finance to get a get-out-of-jail-free card this time. The era of neo-classical economics becoming the "rational", "objective" basis of governance of society is nearing to an end, since governance is ultimately not a matter of scientific truth, but a matter of the desires of the people.
zby 6y ago
I don't know - in 2003 we have learned that flashmobs are possible - eighteen years later we see flashmobs in politics (Capitol Riots) and financial markets. They are still funny and entertaining - but now they are disrupting more than a retail store for a few minutes.
- kingTug 6y ago
  Is it really a “flash” mob if it’s planned months in advance from people organizing publically on Facebook or Reddit?
  - dexen 6y ago
    Yes, very much so - long, gradual built-up of momentum by interested parties is typical to grassroots movements. It happens slowly - and then all at once.
  - superkuh 6y ago
    It's more like a "stand alone complex" from the Ghost in the Shell entertainment series. >"a stand alone complex is multiple copies of a behavior, object, view, ect, existing without an original." It doesn't imply there wasn't an original, but usually that original was just the seed crystal for the behavior.
    - pjc50 6y ago
      Yes, or Baudrillard's "simulacra".
  - xboxnolifes 6y ago
    The "flash" part of flash mob describes the execution of the mob, not the planning. It could be planned years in advanced and still be a flash mob if their audience didn't expect it.
- snidane 6y ago
  It seems that the flash mob just needs to achieve critical mass and then momentum traders and sentiment driven algos will pick up on the sudden trend and bubble it up out of proportions.
Clewza313 6y ago
Last month, Taibbi also wrote this: Instead of stealing from the rich and giving to the poor, the American version takes in the young and sells them to computer-powered hedge funds; this Robin Hood is the house that always wins. https://taibbi.substack.com/p/pandemic-villains-robinhood https://taibbi.substack.com/p/pandemic-villains-robinhood Except when it doesn't, apparently.
- Ygg2 6y ago
  > Except when it doesn't, apparently TIL Matt Taibbi is not the perfect Oracle, that pierces the veil of unknown future. If you asked me that Reddit would use RH app to cause ruckus on Wall Street, I would have laughed that as implausible, one month ago.
  - Clewza313 6y ago
    If you read the articles, last month he was arguing that RH should be better regulated if not banned because it's exploiting poor unknowing victims who don't understand what they're getting into, and now he's arguing that it's just "ordinary people acting — out of self-interest, but also out of sheer enthusiasm for one of the best reasons to do just about anything, because you can". Which one is it?
    - 317070 6y ago
      It looks like he changed his mind. I don't know the guy, but I like him even better for it.
    - hef19898 6y ago
      It can be both. Just because you can doesn't mean you should. And if you still do, and someone enables you, well you can again be a "a poor unknowing victim". RH's business model of "selling" clueless retail investors to the big funds worked. Untill there were to many of those retail investors and RH risked running out of cash.
    - Ygg2 6y ago
      That's a false dichotomy. Some of the people might want greater regulation, some might want less regulation. RH is still very weird thing and it being able to basically hold your stocks hostage and sell them on their own terms, should be regulated. Imagine if you bank basically freezes your assets and sells them off, without your input. You'd want your bank regulated, no?
thaumaturgy 6y ago
One thing I appreciate about Taibbi's article is that he's got the most important part right: this isn't a pump-and-dump, it's a protest. The talking heads doing the pearl-clutching and the commentators around the internet keep talking about how none of this makes financial sense, the fundamentals of the company aren't sound, it can't last forever, someone will get hurt, and it's obvious that zero of those people have scrolled through a single WSB thread. You can't scroll very far through any of the WSB threads without passing comments like this one: "Listen to me. Hedge fund dicks. 1%. And who ever the wants to read this. "I will sell every position I own tomorrow. Red, green... I will sell. I will use all my capital to buy gme tomorrow. Fuck you hedge funds and 1%. "I have been hit by every single financial and economic in the last 25 years. That’s been my adult life. You have taken every fucking thing from me. And now I will spend every single grand I have buying GME. "What do I have to lose? My money? Well you fuckers made damn sure over decades that I’d never be able to own a house or live the life that you’ve been able to enjoy. But blocked from us." That sentiment is posted multiple times in every single major thread -- along with great helpings of jokes and memes and a party atmosphere. So many people keep assuming that the retail traders in this scenario don't know what they're doing and they need to be protected from themselves. They know what they're doing. Some of them have $millions riding on this and they've had multiple opportunities to cash out. But they aren't looking for a payday so much as an opportunity to hurt some Wall Street firms that got a bit arrogant and thought they could get away with shorting more shares of a particular company than existed on the market. Folks can bash Taibbi for getting some details wrong or for writing articles without an editor, but at least he managed to get the basic shape of this whole situation right, which puts him way ahead of a lot of other folks.
- cma 6y ago
  I think a lot of the protest diatribes are really just pumping. That Chamath guy gave a long impassioned speech but then just bought options and immediately sold for a big windfall, which isn't exactly squeezing anyone in a principled stand, it is essentially just pumping and dumping (he donated to charity to avoid allegations of that, so it was really probably just PR for his populist political campaign that offers 0% taxes). And the big hero to the little man stick it to the big man movement is.. the richest man in the United States? Who gave WSB lots of drama and laughter with the $420 stock fraud thing and is anti regulation and SEC enforcement to their newfound desire for enforcement on powerful players? Who ripped off NASA to buy bonds in SolarCity and then bailed that out with Tesla or would probably have gone bankrupt? The WSB people are basically doing this for fun and most of the principle stuff is only on moves that have directly affected their position. Even before some of the bad moves from brokerages today they had principled screeds to draw people in, but the only people who seem to be mad in principle are the crazy qanon people that have now joined in that are basically spreading blood libel against bankers and stuff and latching onto this and probably praying for violence to result or some kind of revolution like fell out of the Albanian MLM stuff. https://en.wikipedia.org/wiki/Pyramid_schemes_in_Albania https://en.wikipedia.org/wiki/Pyramid_schemes_in_Albania
1vuio0pswjnm7 6y ago
The primary complaint in this little rant IMO is that Amercian banks and companies are being propped up (for lack of a better term), and in fact profiting, from government support. The government is engaging in "market manipulation" (though we may use other terminology) by providing funding, including cheap credit, to selected banking institutions and companies, arguably without regard to their "fundamental values".[1] The author suggests those who have profited the most from this action, and to extremes, are banks and investors in so-called zombie companies, not the public. The WSB investors are engaging in "market manipulation" as well, and obviously without regard to the "fundamental value" of GameStop . Given that a chosen government selection of banks and investors have benefitted enormously from the government's "market manipulation", while arguably the general public has not, the author hints at the hypocrisy of bank and government officials criticising the WSB manipulation and those who profited from it. The easiest way to understand the issue IMO is to determine the source of the money as it flows to banks and zombie companies. Does the money come (a) from government (via taxes on citizens) where government decides who will be the recipient or does the money (b) come from private citizens where the private citizen (consumer) decides where she will spend her money. 1. Example companies would be ones that are not profitable but receive significant government support, and this support arguably fuels changes in market value (which may/may not reflect "fundamental value"). Tesla is one example.[a] Moderna is another.[b] a. https://seekingalpha.com/article/4315467-forget-share-price-tesla-is-still-short https://seekingalpha.com/article/4315467-forget-share-price-... (2020) https://realmoney.thestreet.com/investing/stocks/tesla-s-main-product-isn-t-cars-it-s-subsidies-14769263 https://realmoney.thestreet.com/investing/stocks/tesla-s-mai... (2018) https://www.investors.com/politics/editorials/if-tesla-is-worth-more-than-gm-why-are-taxpayers-still-subsidizing-it/ https://www.investors.com/politics/editorials/if-tesla-is-wo... (2017) https://www.latimes.com/business/la-fi-hy-elon-musk-defends-subsidies-20150601-htmlstory.html https://www.latimes.com/business/la-fi-hy-elon-musk-defends-... (2015) Tesla like other auto manufacturers has received billions in government funding. b. https://fintel.io/doc/sec-mrna-10q-moderna-2020-october-30-18565 https://fintel.io/doc/sec-mrna-10q-moderna-2020-october-30-1... Moderna's COVID vaccine mRNA 1273, specifcally the underlying IP, is subject to Bayh-Dole. Obviously they can, are and will be selling to the US government (who will always have rights to this vaccine), but going forward the odds are against them competing with other similar vaccines that have less encumbered IP.
smitty1e 6y ago
"Finance pirates" Why are we all buying this narrative that it's a bunch of little guys on r/WSB driving this? As though the little guy narrative were some average stock pickers who happened onto buying $MSFT back in the late '70s? It may well be the case that a bunch of day traders on a Reddit obtained some good Intel and are stickin' it to The Man. But that also sounds a bit too perfect. If another hedge fund saw an opportunity to blow away some competition, and ran the strategy through a Reddit for plausible deniability, that would also work. It's OK: the federal government will pass the damage on to the peasantry in any case.
deleted 6y ago
[deleted]
imtringued 6y ago
I would like to mention that if you were to pardon over shorting (shorting more than 100% of the available shares) and let a third party defuse the short squeeze through highly questionable means (government bailout would come to mind), then you have created the potential for infinite gains from short selling. This shouldn't be allowed because it would destroy stock markets as we know them.
- T-A 6y ago
  https://www.fool.com/investing/2021/01/28/yes-a-stock-can-have-short-interest-over-100-heres/ https://www.fool.com/investing/2021/01/28/yes-a-stock-can-ha...

268 points by undefined1 6y ago

This has been the best piece on the WSB event I’ve read so far. It gives historical comparison to the 2008 crash, and enough basic explanation so I can better understand the finer points.

deleted 6y ago
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heckerhut 6y ago
The vice piece was better imho https://www.google.com/amp/s/www.businessinsider.com/highly-shorted-stocks-soaring-reddit-wallstreetbet-traders-wall-street-2021-1%3famp https://www.google.com/amp/s/www.businessinsider.com/highly-...
- reustle 6y ago
  Non-AMP URL: https://markets.businessinsider.com/news/stocks/highly-shorted-stocks-soaring-reddit-wallstreetbet-traders-wall-street-2021-1-1030011346 https://markets.businessinsider.com/news/stocks/highly-short...
  - jessaustin 6y ago
    I've been so wrong, so discouraged, so cynical. Truly, there are heroes among us.

santoshalper 6y ago

There is absolutely nothing wrong with short sellers. People who attack short sellers only do it when they are protecting their rich friends who are CEOs. There is absolutely nothing wrong with redditors fucking with short sellers. People who are clutching their pearls about this are only trying to protect rich friends who are hedge fund managers. There is nothing wrong, illegal, or immoral about trying to "manipulate" the stock market unless you are committing fraud or have insider information. CEOs of companies, activist investors, and analysts do this for a living every day. They are not more qualified than us to have and share opinions and history tells us they are perhaps much less. There is absolutely zero reason for anyone - SEC, The Government, robinhood, the exchanges, Facebook - to intervene and anyone who is considering intervention right now is only doing it to protect their rich hedge-fund friends.

tcbawo 6y ago
Not a lawyer, but pump and dump schemes are illegal under existing law: https://www.investopedia.com/terms/p/pumpanddump.asp https://www.investopedia.com/terms/p/pumpanddump.asp Even if the motivation of the 'pump' aspect is perceived to be righting a wrong, consumers left holding the bag will be harmed. The companies involved are intervening to avoid additional liability (they may already be sanctioned for not having safeguards in place). There will most certainly be civil and criminal investigation into the users involved. Although I doubt the government is equipped to investigate the sheer volume of material.
- AnthonyMouse 6y ago
  The difference here is that the people left holding the bag are nominally the short sellers, not anyone being conned into buying the stock. There is a risk that you could hold it too long, i.e. past when they've closed their positions, but that risk is known up front and you're not deceiving anybody. An interesting resolution to this would be if GameStop would allow the short sellers to close their positions by selling them newly minted shares. The result would be that the company would get all the money instead of the shareholders. But the shareholders own the company. So the share price would only crash by half (from the dilution) instead of 99% or whatever it is now. Which would also have the effect of saving the company.
  - BobbyJo 6y ago
    Short sellers aren't holding the bag, they are holding money and owe someone the bag. People who are long are the ones that will suffer when the inevitable crash comes. Also, I don't believe it's legal for a public companies to issue shares to specific parties at sub-market prices. It certainly wouldn't be legal for the to do it if shareholders didn't approve of it.
    - perl4ever 6y ago
      GameStop filed in December with the SEC to sell up to $100M in stock at the market, from time to time. Now it seems like a laughably small amount. I think it is common for public companies to sell stock below market though. If they set a price ahead of time, unlike GameStop in this instance, then the market price will change, right?

cma 6y ago

He only ever talks about the hedge fund collapsing, but never mentions who is next in line (brokerages, clearing houses, and ultimately brokerage customers). SIPR only insures up to $2.5billion against systemic risk, with an additional $2.5billion from the government. Everyone's brokerage account holdings could be transferred to GameStop holders, or government steps in and tweaks things to allow it all to unwind.

perl4ever 6y ago
>Everyone's brokerage account holdings could be transferred to GameStop holders What are you talking about? How does this happen?
- cma 6y ago
  https://www.sipc.org/cases-and-claims/how-a-liquidation-works https://www.sipc.org/cases-and-claims/how-a-liquidation-work... Except with SIPC itself being defunct. You hopefully still have priority over GameStop holders that didn't cash out yet and have busted trades from a bankrupt clearinghouse and priority over other creditors. No SIPC to cover your legal costs pursuing your claims. I think margin accounts may be behind fully settled cash accounts in line.
  - inter_netuser 6y ago
    if a single stock can damage the entire system - perhaps it is the system that's not well designed?
    - QuesnayJr 6y ago
      The system isn't well-designed. The actual mechanics of the stock trading process are jury-rigged to allow for the high volumes of trade we see. People have speculated that this is an area of application for distributed ledger technology, but the Australian Stock Exchange has been trying to roll out such a system and it has been slow: https://www.fintechfutures.com/2020/07/australian-securities-exchange-delays-blockchain-go-live-to-2022/ https://www.fintechfutures.com/2020/07/australian-securities...

tptacek 6y ago

How do people take this guy seriously? All that froth allowed finance companies to suck out hundreds of billions in fees, encouraged lunatic risk-taking in every direction and rampages of private equity takeovers, and kept a vast stable of functionally dead companies alive on cheap credit. Those so-called “zombie companies” make up roughly 30% of all corporations in America now, and they racked up over a trillion dollars in new debt since the pandemic alone. His own link(!) points out that these "zombie companies" include the WSB long target AMC (fair enough), Tesla, and, wait for it, Moderna. Did he even read it? Or does he assume we won't?

chipotle_coyote 6y ago
I remember enjoying Taibbi's "gonzo journalism" style fifteen-ish years ago in Rolling Stone. But whenever I've followed a link to his Substack newsletter, it seems to be, ah, a lot heavier on the gonzo part than the journalism part -- down the rabbit hole of cranky contrarianism with nary an editor around to reel him back occasionally.
- ashtonkem 6y ago
  There seems to be a recent trend of formerly serious people going full crank. There isn't enough consistency in demographics for me to posit a useful theory, but it seems to be happening to a lot of people.
  - op03 6y ago
    Too much spent time getting needled on Twitter. People think their brains are immune to trolling.
    - throwawaysea 6y ago
      This is it. I think the viral short form fast news hot takes format of Twitter (and its related cousins like Reddit) brings out the worst in people. It’s built to amplify the loud fringes who will engage in the worst ways at the drop of a hat. It ends up depressing all the users and turning them into reactionaries who can only tolerate an echo chamber of confirmation bias.

roenxi 6y ago

As always; the story is ongoing and the people taking firm positions about what has happened would be well advised to wait until after it has, in fact, happened. Few if any of the people commenting on this know who got rich out of this yet or what was driving it. Theories - not evidence - are in evidence. Finance is a slow game. Mistakes are built into over month, years or even decades. The only thing that happens quickly is crossing the point of no return. Pretending that a point of no return is when the mistake happened and requires an immediate view or response is bad framing.

lasagnaphil 6y ago
However, I think the "mistakes" of the financial institutions are things that have been already built over the decades throughout the neoliberal era (over-reliance on credit and the reserve currency status of the US dollar), and things are *really* past the point of no return now. You can't deny this populist event has no political consequences whatsoever and can be simply solved in the context of "finance" alone. Quite a lot of Americans already have near zero trust towards financial institutions (well, more after they were bailed out in 2008 and nothing has changed out of their risky financial practices), and it's going to be harder for finance to get a get-out-of-jail-free card this time. The era of neo-classical economics becoming the "rational", "objective" basis of governance of society is nearing to an end, since governance is ultimately not a matter of scientific truth, but a matter of the desires of the people.

zby 6y ago

I don't know - in 2003 we have learned that flashmobs are possible - eighteen years later we see flashmobs in politics (Capitol Riots) and financial markets. They are still funny and entertaining - but now they are disrupting more than a retail store for a few minutes.

kingTug 6y ago
Is it really a “flash” mob if it’s planned months in advance from people organizing publically on Facebook or Reddit?
- dexen 6y ago
  Yes, very much so - long, gradual built-up of momentum by interested parties is typical to grassroots movements. It happens slowly - and then all at once.
- superkuh 6y ago
  It's more like a "stand alone complex" from the Ghost in the Shell entertainment series. >"a stand alone complex is multiple copies of a behavior, object, view, ect, existing without an original." It doesn't imply there wasn't an original, but usually that original was just the seed crystal for the behavior.
  - pjc50 6y ago
    Yes, or Baudrillard's "simulacra".
- xboxnolifes 6y ago
  The "flash" part of flash mob describes the execution of the mob, not the planning. It could be planned years in advanced and still be a flash mob if their audience didn't expect it.
snidane 6y ago
It seems that the flash mob just needs to achieve critical mass and then momentum traders and sentiment driven algos will pick up on the sudden trend and bubble it up out of proportions.

Clewza313 6y ago

Last month, Taibbi also wrote this: Instead of stealing from the rich and giving to the poor, the American version takes in the young and sells them to computer-powered hedge funds; this Robin Hood is the house that always wins. https://taibbi.substack.com/p/pandemic-villains-robinhood https://taibbi.substack.com/p/pandemic-villains-robinhood Except when it doesn't, apparently.

Ygg2 6y ago
> Except when it doesn't, apparently TIL Matt Taibbi is not the perfect Oracle, that pierces the veil of unknown future. If you asked me that Reddit would use RH app to cause ruckus on Wall Street, I would have laughed that as implausible, one month ago.
- Clewza313 6y ago
  If you read the articles, last month he was arguing that RH should be better regulated if not banned because it's exploiting poor unknowing victims who don't understand what they're getting into, and now he's arguing that it's just "ordinary people acting — out of self-interest, but also out of sheer enthusiasm for one of the best reasons to do just about anything, because you can". Which one is it?
  - 317070 6y ago
    It looks like he changed his mind. I don't know the guy, but I like him even better for it.
  - hef19898 6y ago
    It can be both. Just because you can doesn't mean you should. And if you still do, and someone enables you, well you can again be a "a poor unknowing victim". RH's business model of "selling" clueless retail investors to the big funds worked. Untill there were to many of those retail investors and RH risked running out of cash.
  - Ygg2 6y ago
    That's a false dichotomy. Some of the people might want greater regulation, some might want less regulation. RH is still very weird thing and it being able to basically hold your stocks hostage and sell them on their own terms, should be regulated. Imagine if you bank basically freezes your assets and sells them off, without your input. You'd want your bank regulated, no?

thaumaturgy 6y ago

One thing I appreciate about Taibbi's article is that he's got the most important part right: this isn't a pump-and-dump, it's a protest. The talking heads doing the pearl-clutching and the commentators around the internet keep talking about how none of this makes financial sense, the fundamentals of the company aren't sound, it can't last forever, someone will get hurt, and it's obvious that zero of those people have scrolled through a single WSB thread. You can't scroll very far through any of the WSB threads without passing comments like this one: "Listen to me. Hedge fund dicks. 1%. And who ever the wants to read this. "I will sell every position I own tomorrow. Red, green... I will sell. I will use all my capital to buy gme tomorrow. Fuck you hedge funds and 1%. "I have been hit by every single financial and economic in the last 25 years. That’s been my adult life. You have taken every fucking thing from me. And now I will spend every single grand I have buying GME. "What do I have to lose? My money? Well you fuckers made damn sure over decades that I’d never be able to own a house or live the life that you’ve been able to enjoy. But blocked from us." That sentiment is posted multiple times in every single major thread -- along with great helpings of jokes and memes and a party atmosphere. So many people keep assuming that the retail traders in this scenario don't know what they're doing and they need to be protected from themselves. They know what they're doing. Some of them have $millions riding on this and they've had multiple opportunities to cash out. But they aren't looking for a payday so much as an opportunity to hurt some Wall Street firms that got a bit arrogant and thought they could get away with shorting more shares of a particular company than existed on the market. Folks can bash Taibbi for getting some details wrong or for writing articles without an editor, but at least he managed to get the basic shape of this whole situation right, which puts him way ahead of a lot of other folks.

cma 6y ago
I think a lot of the protest diatribes are really just pumping. That Chamath guy gave a long impassioned speech but then just bought options and immediately sold for a big windfall, which isn't exactly squeezing anyone in a principled stand, it is essentially just pumping and dumping (he donated to charity to avoid allegations of that, so it was really probably just PR for his populist political campaign that offers 0% taxes). And the big hero to the little man stick it to the big man movement is.. the richest man in the United States? Who gave WSB lots of drama and laughter with the $420 stock fraud thing and is anti regulation and SEC enforcement to their newfound desire for enforcement on powerful players? Who ripped off NASA to buy bonds in SolarCity and then bailed that out with Tesla or would probably have gone bankrupt? The WSB people are basically doing this for fun and most of the principle stuff is only on moves that have directly affected their position. Even before some of the bad moves from brokerages today they had principled screeds to draw people in, but the only people who seem to be mad in principle are the crazy qanon people that have now joined in that are basically spreading blood libel against bankers and stuff and latching onto this and probably praying for violence to result or some kind of revolution like fell out of the Albanian MLM stuff. https://en.wikipedia.org/wiki/Pyramid_schemes_in_Albania https://en.wikipedia.org/wiki/Pyramid_schemes_in_Albania

1vuio0pswjnm7 6y ago

The primary complaint in this little rant IMO is that Amercian banks and companies are being propped up (for lack of a better term), and in fact profiting, from government support. The government is engaging in "market manipulation" (though we may use other terminology) by providing funding, including cheap credit, to selected banking institutions and companies, arguably without regard to their "fundamental values".[1] The author suggests those who have profited the most from this action, and to extremes, are banks and investors in so-called zombie companies, not the public. The WSB investors are engaging in "market manipulation" as well, and obviously without regard to the "fundamental value" of GameStop . Given that a chosen government selection of banks and investors have benefitted enormously from the government's "market manipulation", while arguably the general public has not, the author hints at the hypocrisy of bank and government officials criticising the WSB manipulation and those who profited from it. The easiest way to understand the issue IMO is to determine the source of the money as it flows to banks and zombie companies. Does the money come (a) from government (via taxes on citizens) where government decides who will be the recipient or does the money (b) come from private citizens where the private citizen (consumer) decides where she will spend her money. 1. Example companies would be ones that are not profitable but receive significant government support, and this support arguably fuels changes in market value (which may/may not reflect "fundamental value"). Tesla is one example.[a] Moderna is another.[b] a. https://seekingalpha.com/article/4315467-forget-share-price-tesla-is-still-short https://seekingalpha.com/article/4315467-forget-share-price-... (2020) https://realmoney.thestreet.com/investing/stocks/tesla-s-main-product-isn-t-cars-it-s-subsidies-14769263 https://realmoney.thestreet.com/investing/stocks/tesla-s-mai... (2018) https://www.investors.com/politics/editorials/if-tesla-is-worth-more-than-gm-why-are-taxpayers-still-subsidizing-it/ https://www.investors.com/politics/editorials/if-tesla-is-wo... (2017) https://www.latimes.com/business/la-fi-hy-elon-musk-defends-subsidies-20150601-htmlstory.html https://www.latimes.com/business/la-fi-hy-elon-musk-defends-... (2015) Tesla like other auto manufacturers has received billions in government funding. b. https://fintel.io/doc/sec-mrna-10q-moderna-2020-october-30-18565 https://fintel.io/doc/sec-mrna-10q-moderna-2020-october-30-1... Moderna's COVID vaccine mRNA 1273, specifcally the underlying IP, is subject to Bayh-Dole. Obviously they can, are and will be selling to the US government (who will always have rights to this vaccine), but going forward the odds are against them competing with other similar vaccines that have less encumbered IP.

smitty1e 6y ago

"Finance pirates" Why are we all buying this narrative that it's a bunch of little guys on r/WSB driving this? As though the little guy narrative were some average stock pickers who happened onto buying $MSFT back in the late '70s? It may well be the case that a bunch of day traders on a Reddit obtained some good Intel and are stickin' it to The Man. But that also sounds a bit too perfect. If another hedge fund saw an opportunity to blow away some competition, and ran the strategy through a Reddit for plausible deniability, that would also work. It's OK: the federal government will pass the damage on to the peasantry in any case.

deleted 6y ago

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imtringued 6y ago

I would like to mention that if you were to pardon over shorting (shorting more than 100% of the available shares) and let a third party defuse the short squeeze through highly questionable means (government bailout would come to mind), then you have created the potential for infinite gains from short selling. This shouldn't be allowed because it would destroy stock markets as we know them.

T-A 6y ago
https://www.fool.com/investing/2021/01/28/yes-a-stock-can-have-short-interest-over-100-heres/ https://www.fool.com/investing/2021/01/28/yes-a-stock-can-ha...